The first erroneous conclusion drawn from the erroneous theory concerns accumulation. Sismondi absolutely failed to understand capitalist accumulation, and in the heated dispute he conducted on this question with Ricardo, the truth turned out, in essence, to be on the side of the latter. Ricardo asserted that production itself creates its own market, whereas Sismondi denied this, building his theory of crises on such a denial. True, Ricardo himself failed to correct the aforementioned fundamental error of Smith, and therefore failed to resolve the question of the relationship between social capital and income and the realization of the product (Ricardo did not even pose these questions to himself) – but he instinctively characterized the very essence of the bourgeois mode of production by noting an absolutely indisputable fact, that accumulation is an excess of production over income. From the standpoint of the newest analysis, this is indeed the case. Production truly does create its own market for itself: for production, means of production are necessary – and they constitute a special sphere of social production, occupying a definite share of workers, yielding a special product, realized partly within this very sphere itself, and partly in exchange with another sphere – the production of articles of consumption. Accumulation is indeed an excess of production over income (articles of consumption). In order to expand production ("accumulate" in the categorical sense of the term), it is first necessary to produce means of production,[55] and for this, consequently, an expansion of that department of social production which manufactures means of production is necessary, it is necessary to draw workers away to it, workers who already present a demand for articles of consumption. Consequently, "consumption" develops in the wake of "accumulation" or in the wake of "production" – strange as this may seem, but it cannot be otherwise in capitalist society. In the development of these two departments of capitalist production, not only is uniformity not required, consequently, but, on the contrary, unevenness is inevitable. It is known that the law of capital development consists in this, that constant capital increases faster than variable capital, i.e., an ever greater and greater part of newly formed capitals is turned toward that department of social economy which manufactures means of production. Consequently, this department must grow faster than that department which manufactures articles of consumption, i.e., precisely what Sismondi declared "impossible," "dangerous," and so forth, occurs. Consequently, the products of personal consumption occupy an ever smaller and smaller place in the total mass of capitalist production. And this fully corresponds to the historical "mission" of capitalism and its specific social structure: the first consists precisely in the development of the productive forces of society (production for the sake of production); the second excludes their utilization by the mass of the population.

We can now fully appreciate Sismondi's point of view on accumulation. His assertion that rapid accumulation leads to disasters is completely erroneous and stems only from a misunderstanding of accumulation, just as do the repeated declarations and demands that production should not outpace consumption, for consumption determines production. In reality, precisely the opposite occurs, and Sismondi simply turns his back on reality in its particular, historically determined form, substituting petty-bourgeois morality for analysis. The attempts by Sismondi to disguise this morality in a "scientific" formula produce a particularly amusing impression. "Messrs. Say and Ricardo," he says in the preface to the 2nd edition of *Nouveaux Principes*, "arrived at that doctrine… that consumption has no other limits except the limits of production, whereas it is limited by income… They ought to have warned producers that they must count only on consumers who have income" (I, XIII).[56] Such naïveté at the present time provokes only a smile. But are not contemporary writings of our Romantics, such as Messrs. V.V. and N.—on, filled with similar things? "Let the bank entrepreneurs think carefully… will there be a market for goods?" (II, 101–102). "When growth of wealth is taken as the goal of society, means are always sacrificed to the goal" (II, 140). "If, instead of awaiting the impulse from the demand for labour (i.e., the impulse to production from workers' demand for products), we think that it will come from prior production, we would do almost what we would do with a clock if, instead of turning back the wheel with the chain (*la roue qui porte la chaînette*), we pushed back another wheel – we would then break and halt the whole machine" (II, 454). This is said by Sismondi. Now let us listen to Mr. Nikolai —on. "We lost sight of the account on which this development (i.e., the development of capitalism) takes place, we forgot even the goal of any production whatsoever… an error most ruinous…" (N. —on, *Essays on Our Post-Reform Social Economy*, 298). Both these writers speak of capitalism, of capitalist countries; both display a complete misunderstanding of the essence of capitalist accumulation. But can one imagine that the latter writes 70 years after the former?

How misunderstanding of capitalist accumulation is connected with the erroneous reduction of all production to the production of articles of consumption is shown vividly by one example that Sismondi cites in Chapter VIII: "Results of the Struggle for the Cheapening of Production" (Book IV: "On Commercial Wealth").

Let us suppose, says Sismondi, that a manufacturer possesses a circulating capital of 100,000 francs, yielding him 15,000, of which 6,000 constitute interest on capital and go to the capitalist, and 9,000 constitute the entrepreneurial profit of the manufacturer. Let us suppose that he employs the labor of 100 workers, whose wages amount to 30,000 francs. Further, let there occur an increase of capital, an expansion of production ("accumulation"). Instead of 100,000 fr., the capital will be = 200,000 fr. invested in fixed capital, and 200,000 in circulating capital, a total of 400,000 fr.; profit and interest = 32,000 + 16,000 fr., for interest has fallen from 6% to 4%. The number of workers has doubled, but wages have fallen from 300 fr. to 200 fr. – a total, consequently, of 40,000 fr. Production has thus quadrupled.[57] And Sismondi calculates the results: "income" or "consumption" were first 45,000 fr. (30,000 wages + 6,000 interest + 9,000 profit), and now 88,000 fr. (40,000 wages + 16,000 interest + 32,000 profit). "Production has quadrupled," says Sismondi, "but consumption has not even doubled. One should not count the consumption of workers who made the machines. It is covered by the 200,000 francs spent on it; it already constitutes part of the calculation of another manufactory, where the same facts will appear" (I, 405–406).

Sismondi's calculation proves a reduction of income with growth of production. The fact is indisputable. But Sismondi fails to notice that his very example refutes his own theory of the realization of the product in capitalist society. His remark is curious, that the consumption of workers who produced machines "should not be counted." Why? Because, firstly, it is covered by 200,000 fr. This means capital has been transferred to the sphere manufacturing means of production – this Sismondi fails to notice. This means the "internal market," about the "contraction" of which Sismondi spoke, is not exhausted by articles of consumption, but also consists in means of production. These means of production, after all, constitute a special product, whose "realization" does not consist in personal consumption, and the faster accumulation proceeds, the more powerfully that sphere of capitalist production develops which yields products not for personal but for productive consumption. Secondly, replies Sismondi, these are workers of another manufactory, where the same facts may appear (*où les mêmes faits pourront se représenter*). As you see, this is a repetition of Smith's practice of sending the reader "from Pontius to Pilate." But in this "other manufactory" too, constant capital is employed, and its production likewise creates a market for that subdivision of capitalist production which manufactures means of production! No matter how many times we push the question from one capitalist to another, from the second to the third – this subdivision will not disappear because of it, and the "internal market" will not be reduced to merely articles of consumption. Therefore, when Sismondi says that "this calculation refutes… one of the axioms upon which they have most insisted in political economy, namely, that the freest competition determines the most advantageous development of industry" (I, 407), he fails to notice that "this calculation" refutes himself as well. It is indisputable that the introduction of machines, displacing workers, worsens their condition, and the merit of Sismondi is indisputable – he was one of the first to point this out. But this in no way prevents his theory of accumulation and the internal market from being a complete error. His own calculation shows vividly precisely that phenomenon which Sismondi not only denied, but even converted into an argument against capitalism, saying that accumulation and production must correspond to consumption, otherwise there will be a crisis. The calculation shows precisely that accumulation and production outpace consumption and that things cannot proceed otherwise, for accumulation occurs chiefly at the expense of means of production, which do not enter into "consumption." What seemed to Sismondi a simple error, a contradiction in Ricardo's doctrine – namely, that accumulation is an excess of production over income – this in reality perfectly corresponds to actuality, expressing the contradiction inherent in capitalism. This excess is necessary in any accumulation, which opens a new market for means of production, without a corresponding increase in the market for articles of consumption, and further, with a contraction of this market.[58] Then, in rejecting the doctrine of the advantages of free competition, Sismondi fails to notice that together with empty optimism he throws overboard an indubitable truth, namely, that free competition develops the productive forces of society, as follows precisely from his own calculation. (Properly speaking, this is merely another expression of that same fact of the creation of a special subdivision of industry manufacturing means of production, and especially its remarkably rapid development.) This development of the productive forces of society without corresponding development of consumption is, of course, a contradiction, but precisely such a contradiction as actually exists, which flows from the very essence of capitalism and from which one cannot make excuses with sentimental phrases.

And it is precisely with such excuses that the Romantics make their apologies. And in order that the reader not suspect us of making groundless accusations of contemporary economists concerning the errors of such an "outdated" writer as Sismondi, let us cite a small sample from a "newest" writer, Mr. N. —on. On p. 242 of his *Essays* he argues about the development of capitalism in Russian flour-milling. Citing indications of the appearance of large steam mills with improved instruments of production (approximately 100 million rubles has been spent on the reconstruction of mills since the 1870s) and with labor productivity increased more than twofold, the author characterizes the phenomenon described in this way: "flour-milling did not develop, but only became concentrated in large enterprises"; then extends this characterization to all branches of industry (p. 243) and draws the conclusion that "in all cases without exception, a mass of workers is freed and finds no employment" (243) and that "capitalist production developed at the expense of popular consumption" (241). We ask the reader: does such an argument differ in any way from Sismondi's argument just cited? This "newest" writer states two facts, the same very facts we saw in Sismondi's example, and dismisses both these facts with the same sentimental phrase. Firstly, his example proves that the development of capitalism proceeds precisely at the expense of means of production. This means capitalism develops the productive forces of society. Secondly, his example proves that this development proceeds by precisely that specific path of contradictions which is inherent in capitalism: production develops (the expenditure of 100 million rubles – an internal market for products realized by non-personal consumption) without corresponding development of consumption (popular nutrition worsens), i.e., precisely production for the sake of production occurs. And Mr. N. —on thinks that this contradiction in life will disappear if he, with the naïveté of the old Sismondi, presents it merely as a contradiction of doctrine, merely as a "most ruinous delusion": "we forgot the goal of production"!! What could be more characteristic of such a phrase: "did not develop, but only became concentrated"? Evidently, Mr. N. —on knows of such a capitalism in which development could proceed otherwise than through concentration. What a pity that he has not acquainted us with such a "distinctive," unknown capitalism, unknown to all political economy that preceded him!